Sending kids off to college these days can be incredibly expensive, especially if your child has been accepted by a top school but has little in the way of scholarships or other aid. If something happens and they can't finish the semester, can you afford to be out all that money?
What is college tuition insurance?
As the name implies, college tuition insurance covers college tuition. Much like travel insurance, college tuition insurance is one of those things you really don't need until the moment you need it. And at that point, it's, of course, much too late to get a policy.
But rather than emptying out your college savings account, with no chance of turning back in case of an emergency, it might be worth getting a little coverage. If your student drops out of college for one of the many reasons listed on a college tuition insurance policy, you will get your money back.
So if your student develops a chronic physical health condition, for example, or you suspect they may struggle with their mental health once away from home, tuition insurance gives you a better guarantee that if your student doesn't finish their academic term, you won't be left holding the bag.
What does college tuition insurance cover?
Although you never want to have to use things like college tuition insurance, it's important to understand what it does and doesn't cover long before you need it. Policies will differ by insurer and state, but in general, you can expect a college tuition insurance policy to cover things like:
- Illness
- Serious injury
- Mental health conditions
- The student's or tuition payer's death
However, it's important to note that while pre-existing conditions are often covered, they may not be covered if the student is undergoing treatment for them. The student generally needs to be free of symptoms for up to 180 days before the first day of school -- but check with your insurer for their particular pre-existing condition policies.
What does college tuition insurance not cover?
College tuition insurance doesn't cover everything and shouldn't be considered insurance against simply choosing to drop out of school. If the policy doesn't cover a reason your student might drop out, it's almost certainly excluded.
A few common causes of students dropping out of school that are excluded include:
- Participation in professional sports (if your kid makes it to the Big League and leaves school)
- Substance abuse
- Simply being bored and wanting to get on with their lives
Generally, some situations can create unexpected reasons for dropping out, but again, coverage will vary by policy. You'll definitely want to learn more about that from potential insurers.
What to know before buying a college tuition policy
Because your college tuition insurance may cover things like room and board and tuition, you'll want to make sure you have plenty of coverage. If you only insure your college tuition, you won't recover all your education costs if your student has to leave school unexpectedly.
Policy costs can vary but are generally about 1% of the tuition. So if your school, with room and board, costs about $60,000 annually, you can expect to insure tuition for $600. However, if your school doesn't offer any kind of tuition reimbursement plan, you may be paying considerably more.
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A tuition reimbursement plan is a prorated refund where students only lose the part of the tuition they used while at school (i.e., if they stayed for the first quarter of a semester, they might receive a 75% refund).
Lastly, to make a claim, your student will need to see a doctor for their condition. They will also need to provide a note or other medical record that officially states that the student will need to discontinue their education for some significant amount of time.
For example, suppose your child is diagnosed with a major illness in the sixth week of school. They'd need a doctor's note saying they will experience a significant enough interruption of their education that dropping out is the only short-term solution. (This isn't meant for short-term situations, such as when your kid has appendicitis and will need a week off from school.)
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